NSE Intra-day chart (23 August 2019)
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Market Commentary 26 August 2019
Markets to make an optimistic start as govt announces measures to revive economy


Indian equity bourses staged recovery to end higher on the last trading day of the week. The start of the day was negative, as credit rating agency ICRA estimated that India's gross domestic product (GDP) growth may ease to 5.5-6 percent in the first quarter (April-June) of the fiscal year 2019-20, amid a slowdown in the expansion of industry and agriculture. Domestic sentiments remained subdued during first half of the session, amid reports that Chief Economic Adviser (CEA) Krishnamurthy Subramanian virtually ruled out a major stimulus package for the economy, saying profit is private, losses are public is not good economics. He said sunrise and sunset phases for industry are usual and expecting the government to support industry in sunset phases can be morally hazardous. But, in the second half of the session, key indices gained the traction, following firm global markets. Domestic sentiments got a boost, as the Central Board of Direct Taxes (CBDT) said that small startups with turnover up to Rs 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961 (the Act), which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation. Market participants also took support with reports that the commerce ministry will soon come out with a new foreign trade policy, with an aim to simplify procedures for exporters and importers besides providing incentives to boost outbound shipments. Finally, the BSE Sensex gained 228.23 points or 0.63% to 36,701.16, while the CNX Nifty was up by 88.00 points or 0.82% to 10,829.35.


The US markets ended deeply in red on Friday on renewed US-China trade concerns after a series of threatening comments from President Donald Trump. Trump claimed the US does not need China and would be far better off without them and subsequently ordered American companies to immediately start looking for an alternative to China. He said the vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must stop. The comments from Trump came after the Chinese Finance Ministry announced plans to impose new tariffs on $75 billion worth of US imports. The new levies include 5 percent tariffs on US soybeans and crude oil imports, which are scheduled to take effect on September 1st. The move by China was in response to Trump's plan to impose a 10 percent tariff on $300 billion worth of Chinese imports. On the economic front, Federal Reserve Chairman Jerome Powell delivered his highly anticipated speech at the Jackson Hole Economic Policy Symposium on Friday, reiterating the Fed will act as appropriate to sustain the US economic expansion. Powell described the three weeks since the Fed decided to lower interest rates by 25 basis points at its July meeting as eventful. The Fed Chief cited President Donald Trump's announcement of new tariffs on Chinese imports as well as further signs of a global economic slowdown, notably in Germany and China. Powell also pointed to several geopolitical events, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government. As a result of the subsequent uncertainty, Powell said the Fed is carefully watching developments as we assess their implications for the US outlook and the path of monetary policy. Dow Jones Industrial Average dropped 623.34 points or 2.37 percent to 25628.90, Nasdaq fell 239.62 points or 3.00 percent to 7751.77 and S&P 500 was down by 75.84 points or 2.59 percent to 2847.11.


Crude oil futures settled lower on Friday after China announced that it would impose retaliatory tariffs on $75 billion worth of imports from the US, including a levy on crude, amplifying concerns about the global economy and demand prospects.  Reports said tariffs of 10% and 5% would take effect on two batches of goods worth $75 billion on September 1 and December 15. The tariffs include an extra 5% levy on crude-oil imports beginning next month. Besides, President Donald Trump threatened further actions against Beijing and said he had hereby ordered US firms to look for alternatives to China. Benchmark crude oil futures for October plunged $1.18 or 2.1 percent to settle at $54.17 a barrel on the New York Mercantile Exchange. October Brent dropped 58 cents or 1 percent to settle at $59.34 a barrel on London's Intercontinental Exchange.


Indian rupee ended higher against the American currency on Friday, as fresh sale of the US currency by exporters paced up. That apart, the rupee derived its strength from strong gains in the local equity markets. Local currency got some support with Niti Aayog Vice Chairman Rajiv Kumar's statement that the government is considering a number of measures which will be taken at an appropriate time to deal with financial stress and unleash animal spirit in the economy. However, gains remain capped as credit rating agency ICRA estimated that India's gross domestic product (GDP) growth may ease to 5.5-6 percent in the first quarter (April-June) of the fiscal year 2019-20, amid a slowdown in the expansion of industry and agriculture. On the global front, euro fell to three-week lows on Friday as rising US bond yields boosted the dollar before a speech by the head of the Federal Reserve, which some investors believe will see him signal reluctance to embark on a long rate-cut cycle. Finally, the rupee ended at 71.66, 15 paise stronger from its previous close of 71.81 on Thursday.


The FIIs as per Friday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 4983.26 crore against gross selling of Rs 6273.18 crore, while in the debt segment, the gross purchase was of Rs 4177.45 crore with gross sales of Rs 1574.98 crore. Besides, in the hybrid segment, the gross buying was of Rs 5.25 crore against gross selling of Rs 3.90 crore.


The US markets declined on Friday after President Donald Trump ordered that US manufacturers find alternatives to their operations in China. Asian markets trading in red on Monday amid escalation in US-China trade war as reports said America will hike tariffs on $250 billion worth of Chinese goods to 30% from 25%. Indian markets snapped 3-day losing streak and ended higher on the back of short-covering amid hopes of stimulus package from government. Today, the markets are likely to make an optimistic start of new week as the Finance Ministry announced measures to boost the economy on Friday evening post-market hours. The government announced a slew of measures to boost the economy, including rollback of enhanced super-rich tax on foreign and domestic equity investors imposed in the Budget. Finance Minister Nirmala Sitharaman has said the India's Gross Domestic Product (GDP) continues to grow at a faster pace than the global economy and any other major economy. Besides, Industry body CII has said the multi-sectoral and multi-dimensional policy stimulus announced will have significant impact, imparting stability and underpinning a new growth impetus for India. Market participants will be looking ahead to the release of GDP data later in the week. Investors will be also eyeing the Reserve Bank of India (RBI) board meeting later today to finalise its annual accounts, is also likely to take up the Bimal Jalan committee's recommendations on Economic Capital Framework (ECF) along with the dividend payment to the government. Meanwhile, the government will soon consider a proposal of relaxing rules for complying with the mandatory 30 per cent local sourcing norms by foreign single brand retailers. However, some cautiouness may come as Moody's Investors Service revised downwards India's GDP growth forecast for the current year to 6.2%, saying the economy remains sluggish due to a combination of factors such as weak hiring, distress among rural households and tighter financial conditions. The GDP growth forecast for 2019 calendar year was revised downwards from its previous estimation of 6.8%. The same for 2020 was also lowered by a similar 0.6 percentage points to 6.7%. There will be some buzz in the banking stocks as Finance Minister Nirmala Sitharaman announced upfront capital infusion of Rs 70,000 crore into public sector banks, a move aimed at boosting lending and improving liquidity situation. The move is expected to generate additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore. Also, auto stocks will be in focus as the government announced several relief measures including deferring one-time registration fee, lifting a ban on the purchase of petrol/diesel vehicles by its departments and allowing higher depreciation, but it remained non-committal on the demand for a reduction in GST rates. In a bid to help clear rising inventory of BS-IV emission compliant vehicles, it said such vehicles purchased till March 31, 2020 will be allowed to ply till the validity of their registration.


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